Summary of “Open Space” Dialogue Session

Summary of “Open Space” Dialogue Session

From the Intentionally Designed Endowment Forum held at San Francisco State

The Intentionally Designed Endowment Forum at San Francisco State University was held on August 25-26, 2016. Leaders from universities and foundations and sustainable investment professionals gathered to explore a range of investment strategies related to sustainability challenges.   

During the Forum participants engaged in small group conversations on topics of their choosing using a facilitation technique known as “Open Space”.  Below is a summary of the notes taken by a volunteer scribe in each of those conversations. This summary is in note-taking format and does not include direct quotes or attribution as the conversations were held under the Chatham House Rule.  


Clean Energy Investing:

  • Universities and endowments are in a unique position to address climate change because they have the funds, knowledge, and are allowed to invest for the long-term in illiquid assets. i.e. through green revolving funds
  • The pricing of solar has dropped drastically the last few years and the best IRR on clean energy investments are direct investments into your own use of clean energy – economics are better if you build the project on site rather than buying clean energy from another source.  Do not need to pay for distribution and line losses with the utility. 


Fiduciary Duty:

  • Some board/investment committee members do not believe ESG integration can deliver competitive returns or that it is within their fiduciary duty
  • Tensions:
    • Need for current earning and focus on future growth of assets and long-term sustainability
    • Fear of doing something new due to personal reputation and job risk associated if it under performs
    • Pressure to deliver competitive short-term results – timing of return results and appropriate time horizon for evaluating performance
      • Spending policy and something of return volatility with multi-year averaging of returns (for purpose of the distribution policy) helps to resolve short-term performance issues
  • Stakeholders and boards rarely focus on risk-adjusted returns, except at funds where asset preservation has become goal
  • Using the SRI or ESG nomenclature barrier
  • Opportunities:
    • Many university investment offices also manage other pots of money (deferred compensation and retirement assets) where ESG integration could be applied
    • The IRS and Dept of Labor guidelines are helpful but guidance from AG’s on how they interpret UPMIFA would provide better comfort, since they AGs regulate nonprofits
    • Engagement with students and education of them about investment of the endowment is part of mission
    • IEN can assemble teams of peers to help educate investment committees where that would help
    • Desire for a clear process for requesting peer assistance from investment committee members and CFO’s/CIOs to help educate reluctant fiduciaries was expressed.
    • Interest in having a request submitted to the California AG for an opinion of guidance adopting the IRSK and Department of Labor advice on produce of ESG integration to nonprofits was recommended as a priority initiative. Given the CalPERS, CalSTRS, and the UC have already implemented this strategy, this should be feasible.


Measuring Impact of Portfolio:

  • Defining the impact can be difficult – most reporting is financial but tying impact performance to a story can be powerful
    • Impact of holding cash in Charles Schwab vs. community bank
    • Rolling up data on impact is a challenge across the portfolio
      • 1st step is to identify the impact goal and timeline (will help engage stakeholders) and then identify what portion of portfolio it applies to
      • 2nd step is to link to desired outcomes
      • 3rd step is to discuss with investment managers
      • Private universities can be more nimble than public universities
      • Examples:
        • Becker College has a portion of foundation funds aside for an incubator – invest into local community for students/alumni who want to start business
        • Cal State LA has set funds aside for facilities related to an incubator


Implementation - what’s Going on in my Portfolio:

  • Student activism, chancellor’s office (CSU) and periodicals are major drivers for conversation and consideration - involvement with students helps frame their conversation from both points of view
  • Need to have SRI language in the IPS that is descriptive and direct.  Clear mission statement.
  • Creating separate ESG pools of capital to “test” the space is a common way to begin
  • Quantifiable results help test the stories to stakeholders (students, mission-driven groups, etc.)


Interactive Ways to View Sustainable Investing Scenarios:

  • Providing data (point in time) to create drillable pie charts to help provide into to the board and create change.  Help to anticipate change and provide options and then focus on value.
  • Use scenarios to predict emerging directions for social and environmental issues and then use a scenario dashboard to project investment options against these scenarios:
    • Carbon debate and how it will impact the marketplace
    • Social issues and the impact on global trading
    • Sustainability projections/issues
    • Useful tools are United Nations Environment Program (designing for disruption); investment dashboard software; MSCI, Morningstar t track performance


Student-led SRI funds as a Way to Engage Students

  • Pragmatic consideration:  students making decisions in academic context results in real legitimacy among activist students and the process also shows business students that doing well for society has value for companies and is not just altruistic.  Cross-disciplinary between business and environmental studies.
  • Example: CSU Northridge – 27-year-old student managed fund, SRI fund invest ~ 1 yr
    • Uses funds from campus (foundation & corp)
    • 60/40 all liquid, CSUN public equities, one sustainable portfolio, reinvest 20% per year
    • System required it to be part of academic class with professor
      • Same professor year-over-year for continuity
      • Students needs to apply
      • Also have a professional broker as extra check – institutional roles
      • Consideration:  have competition among funds in an inexpensive place to travel where top performers explain what they did (used to have the “Rise Competition” – UDayton was a sponsor with UN Compact)
        • FI360 – IPS, fiduciary training
        • AGB – governance training


How can we engage students in shareholder activism?

  • Spectrum of engagement could be from limited liability to students representing the university at Annual General Meeting
  • Support for having a conversation by:
    • Creating videos or websites to educate around what is an endowment
    • Hosting peer-to-peer forums to public lectures
    • Provide students with materials in environmental studies courses, liberal arts, investment courses, and infusing ESG integration and proxy voting into finance courses
    • Steps:
      • Know what is “going-on” at universities
      • Universities have to have an engagement proposal
      • Understanding what you hold and the ESG issues related to those holdings
      • In the near term: get the right people on a committee
      • Barriers:
        • Students feel a level of ownership because they have affiliated with the university and they are the recipients but foundation/endowment is not their money
        • Broad range of stakeholders at a university




Several of the conversations that took place at this forum and summarized above will continue in various venues within the Intentional Endowments Network (IEN) and will lead to the development of resources to support endowments in making progress on these topics.  IEN Working Groups on various topics are a main way these conversations move forward within the Network.


If you would like to add to the conversation, join an existing Working Group, or propose a new one please contact: [email protected]

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